Lecture: How Political Ideology Shapes Economic Policy

Introduction

• Focus on different political ideologies and their approach to economic policy.
• Key ideologies: Liberal, Conservative, and Libertarian.
• Concepts to understand: Fiscal policy and Monetary policy.

Key Terms

Fiscal Policy

• Decisions about government spending and taxation.
• Managed by Congress.
• Example: Decisions like funding for military equipment.

Monetary Policy

• Decisions about money supply in the economy.
• Managed by the Federal Reserve (The Fed).
• Tools include buying/selling government bonds, setting reserve requirements, and interest rates.

Ideological Perspectives

Liberal Ideology

• Favors significant government intervention in the economy.
• Belief in government spending and regulation as stabilizing forces.
• Supported by Keynesian economics:
  • Originated during the Great Depression.
  • Advocates for increased government spending in times of economic downturn.
  • Example: Roosevelt's federal work programs and social security.

Conservative Ideology

• Supports minimal government intervention.
• Emphasizes free market solutions and individual economic freedom.
• Supported by Supply-Side Economics:
  • Focus on supporting businesses to stimulate economic growth.
  • Advocates for reduced business regulations and lower taxes.

Monetary Policy Views

• Conservatives: Favor using monetary policy for economic stability.
• Liberals: Consider monetary policy too slow for immediate economic impact.

Libertarian Ideology

• Advocates for minimal government intervention in the economy.
• Government’s role: Protect property rights and ensure free trade.
• Opposes regulation and extensive government programs.

Conclusion

• Understanding these ideological perspectives is crucial for analyzing economic policies.
• Encouragement to access additional resources for exam preparation.
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